Securing the corporate veil of a limited company

[delarue]

Hello everybody
I think to switch my shareholding by putting an holding as the only shareholder to secure my limited company owning real estate and avoiding being a shareholder as a physical person to secure the limited company from any personal creditor on the future.

Do you think that it brings an extra protection if one day I get a debt personnaly or that the corporate veil related to the limited company is enough ?

Knowing that the limited doesn’t engage in
risky activity but only in investing in real estate.

Thank you in advance for your suggestions.

 

[Sols]

This is very hard to answer in any meaningful way, because slight details can affect whether and to what degree you are liable with your current setup. Adding a holding company can add extra security but it won't necessarily protect you completely in case of gross negligence, criminal activities, or fraudulent conduct. It also varies a lot by local and applicable law.

In general, yes, adding a holding company puts you one step further away from the activities and can shield you from liability. But some laws let courts bypass holding companies when they have just one shareholder or one UBO.

But you'd be wise to consult with a lawyer who understand the relevant laws.

 

[Jerry1911]

But some laws let courts bypass holding companies when they have just one shareholder or one UBO.

In which countries is this the case?

 

[CyprusLawyer101]

Hello everybody
I think to switch my shareholding by putting an holding as the only shareholder to secure my limited company owning real estate and avoiding being a shareholder as a physical person to secure the limited company from any personal creditor on the future.

Do you think that it brings an extra protection if one day I get a debt personnaly or that the corporate veil related to the limited company is enough ?

Knowing that the limited doesn’t engage in
risky activity but only in investing in real estate.

Thank you in advance for your suggestions.

Actually the additional layer of a holding company you are looking to add, does not effectively provide any more protection to you if you have a claim against you and your creditor knows of the existence of the property. The creditor would still go after you and your shares, which could be in the 2nd holding company or in the primary if you do not set up a 2nd one. If though your creditor is looking for your assets then by having a 2nd layer holdco you might be gaining some time by making his life more difficult and hopefully not sensible to keep chasing on that direction.

From the point of view of piercing the corporate veil , this would mean that the liability arises at the level of the 1st holdco. In this case if it is the taxman it will go after the real estate first unless they suspect and serious offence; same will happen for a creditor + they will go after any potential guarrantors.

In case of a fraud or other serious offense, forget about the corporate veil protection altogether. Establishing a serious offence requires the human wrongdoing and if you are that human performing the wrongdoing and it can be proved then no corporate veil has any real effect.

 

[Gediminas]

Hello everybody
I think to switch my shareholding by putting an holding as the only shareholder to secure my limited company owning real estate and avoiding being a shareholder as a physical person to secure the limited company from any personal creditor on the future.

Do you think that it brings an extra protection if one day I get a debt personnaly or that the corporate veil related to the limited company is enough ?

Knowing that the limited doesn’t engage in
risky activity but only in investing in real estate.

Thank you in advance for your suggestions.

Hey,

Having a separate holding for real estate is a must. I mean it would be risky and unusual to keep business operations and “personal” savings in the same company. It depends on activities, but if it is e-commerce or other activities which might attract a claim (even theoretically) would be better not to keep other assets in the same company. This is the reason why we call the legal form a “limited liability company”. Business is a risky matter so shareholders should be protected from losses since the company is responsible only for the assets it has.

Talking about personal claims the situation is of course different and holding would not protect from anything. For such cases, much more difficult structures are used. The basic rule comes from Actio Pauliana principle. If claims have not existed at the moment you transferred assets to the structure they might stay safe. However, if a claim existed at that moment, it is unlikely that any structure would protect assets (legally).